VIX Fix?

The Nasdaq had no trouble slicing through the band of potential support I
showed you on
Monday, Dec. 18.

The outcome was a tremendous continuation move off the bounce from the top of
band from my Dec.
11th “Chart of the Day.”

Talk about a falling knife. Thursday’s action is a great illustration of how
dangerous it is for traders to become soothsayers and thus get emotionally attached
to a specific outcome. When you do this, you lose your objectivity when the
totally unexpected happens. So while it is important to recognize all the
current technical evidence, it is even more important to wait for price action
to either confirm or disprove the what that evidence is suggesting.

The temptation to predict an outcome will be especially powerful with what
I’m showing you below.

As you can see, today’s action propelled the CBOE Market Volatility
Index
(
VIX |
Quote |
Chart |
News |
PowerRating)
to a level that has been pretty consistent in coinciding with
the bear market rallies we’ve been seeing since April. Adding to the argument
for potential support, the Nasdaq has come down to a four-month trendline.

It’s important to recognize that that is a rather crude
application of the VIX. For a more refined view, check out the Market Bias page
tomorrow morning. Dave Landry told me today that you will see a fresh CVR III up
signal when you go there.

Until Thursday,

Eddie